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Tundra finds Pakistan’s energy sector lucrative for Scandinavian investors

April 26, 2017

KARACHI: A Swedish asset manager, which has invested around $125 million in Pakistan’s equity and capital markets, is eyeing the country’s renewable energy sector as one of the potential-laden investment avenues to park money of Scandinavian investors.

AAH Soomro, senior advisor at Tundra Fonder AB said alternative energy sector, primarily wind and solar, has good opportunities to raise capital from foreign investors.

“There are various investment opportunities that could be looked into other than the equity capital markets,” Soomro said in an emailed interview with The News. “But for our investors, we are very wary in terms of ease of capital flows – an area Pakistan has so far appeased its foreign investors in.”

Tundra Fonder AB, a Stockholm based privately owned investment manager, invests in Pakistan through two of its flagship funds: Tundra Frontier Opportunities Fund and Tundra Pakistan Fund. These funds have approximately invested $25 million and $100 million in the country’s equity and capital markets, respectively.

“Currently, almost 50 percent of Tundra’s assets under management are invested in Pakistan,” Soomro added. “Our allocation reflects over growing optimism over Pakistan as a potential long-term investment avenue.”

Tundra is currently looking into a number of projects within Pakistan’s energy sector as this is the area where Tundra sees a strong interest from Scandinavian investors.

Its advisor said Tundra is continuously evaluating projects on standalone basis and alongside the conventional equity markets. “We are studying other avenues of private equity, alternative investment and venture capital in Pakistan, once we see visible signs of investors’ appetite.”

Soomro said Tundra would continue to project, promote and invest in Pakistan stock market after its inclusion in the universally-acceptable benchmark Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index.

The US equity indices would include the Pakistan Stock Exchange into its EM index next month, which will attract more foreign funds.

“The validation would strengthen the case Tundra has pitched for Pakistan to foreign investors and consequently, should be able to attract more and more investors to participate in the fundamental dynamics of Pakistan,” Soomro said.

“The expected increase in the liquidity, backed by strong economic growth, would make our pitch-book migrate from Pakistan ‘story’ to Pakistan ‘reality’.”

He said the broader KSE 100-share Index is poised for a stronger run and can nudge up to 75,000 points in less than two years.

“Events, such as, MSCI emerging market-related inflows, re-rating of the valuations, such as, P/E (price to earnings) ratios, probable removal of bonus tax, introduction of derivates and financing products, and integration of Pakistan Stock Exchange with other markets could bring more visibility to global investors,” he added.

The equity expert said a supporting economic growth, led primarily by CPEC- (China-Pakistan Economic Corridor) related inflows and lower interest rate – stemming from lower energy prices – would continue to prompt consumers to spend more and industries to borrow more.

On upcoming initial public offering (IPO) of Daewoo Express Bus Service, Soomro said Tundra’s exposure to Daewoo Express is a classic reflection of the development-oriented theme that Pakistan projects.

“We believe the IPO should garner exceptionally warm welcome from the infrastructure and growth-seeking investors,” he said. “Operating in the formal sector of a very young population, coupled with a not-so-impressive alternative means of travel, Daewoo Express has capitalised on the long-term needs of the masses strategically.”